Corporate Sustainability at a Crossroads

Progress Toward Our Common Future in Uncertain Times

by: David Kiron, Gregory Unruh, Nina Kruschwitz, Martin Reeves, Holger Rubel, Alexander Meyer Zum Felde
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MIT Sloan Management Review and The Boston Consulting Group have been tracking corporate sustainability for the past eight years, surveying tens of thousands of managers and interviewing more than 150 executives and thought leaders, while producing eight annual reports and numerous blogs and articles. MIT SMR and BCG joined forces to increase knowledge about business adoption of sustainable practices and to support the integration of sustainability into business strategy. (See Appendix for summaries of the reports.)

Despite significant progress, corporate sustainability has arrived at a crossroads. In one direction, corporate leaders in sustainability remain a minority, and are unevenly distributed across geographies and industries. In the other direction, a handful of standout companies are demonstrating that sustainability can be a driver of innovation, efficiency, and lasting business value. Populist political movements around the world threaten to set back global diplomatic progress on issues like climate change and reverse recent regulatory trends. All of this complicates the calculus of corporate leaders and their sustainability strategies.

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References

1. The World Commission on Environment and Development, “Our Common Future,” Oxford University Press, 1987.

2. United Nations Global Compact, n.d., https://www.unglobalcompact.org.

3. “GRI and Sustainability Reporting,” n.d., www.globalreporting.org.

4. D. Kiron, N. Kruschwitz, K. Haanaes, M. Reeves, S.-K. Fuisz-Kehrbach, and G. Kell, “Joining Forces: Collaboration and Leadership for Sustainability,” Jan. 12, 2015, https://sloanreview.mit.edu.

5. G. Unruh, D. Kiron, N. Kruschwitz, M. Reeves, H. Rubel, and A.M. zum Felde, “Investing for a Sustainable Future,” May 11, 2016, https://sloanreview.mit.edu.

6. E.F. Williams’ book, “Green Giants: How Smart Companies Turn Sustainability into Billion-Dollar Businesses” is one source for this, but also BASF, Unilever, and others make this claim.

7. D. Kiron, N. Kruschwitz, H. Rubel, M. Reeves, and S.-K. Fuisz-Kehrbach, “Sustainability’s Next Frontier,” Dec. 16, 2013, https://sloanreview.mit.edu.

8. Swiss Re, “Sigma Explorer,” n.d., http://www.sigma-explorer.com.

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10. P. Lacy, T. Cooper, R. Hayward, and L. Neuberger, “A New Era of Sustainability,” June 2010, http://www.unglobalcompact.org.

11. Institute for Sustainable Investing, “The Demanding World of Sustainable Investing,” Nov. 17, 2016, www.morganstanley.com.

12. UNEP Finance Initiative, “Integrated Governance: A New Model of Governance for Sustainability, June 2014, http://www.unepfi.org.

13. United Nations, “Principles for Responsible Investment: About the PRI,” n.d., www.unpri.org.

14. Sustainability Accounting Standards Board, “Mission,” n.d., https://www.sasb.org.

15. Sustainability Accounting Standards Board, “SASB 2015 Annual Report,” June 1, 2016, https://www.sasb.org, p. 13.

16. Sustainable Stock Exchanges Initiative, “2016 Report on Progress,” 2016, http://www.sseinitiative.org.

17. See G. Unruh et al., “Investing for a Sustainability Future.” More generally, aggregators of sustainability tools are on the rise. One example being developed at MIT Sloan School of Management is discussed in Bankson, A. M., “Find, Compare, Choose, and Learn About Sustainability Tools With SHIFT,” Nov. 16, 2016.

18. A. Davidson, “’Sustainable Investing’ Goes Mainstream,” Wall Street Journal, Jan. 13, 2016, https://www.wsj.com.

19. Climate Bonds Initiative, “Bonds and Climate Change: The State of the Market in 2016,” July, 2016, https://www.climatebonds.net.

20. E.L. Guidice and A. Panerai, “Here’s Why the Green Bond Market Is Set to Keep Growing,” Aug. 16, 2016, www.weforum.org; Bank for International Settlements, “BIS Statistics: Charts,” BIS Quarterly Review, June 2016, http://www.bis.org.

21. Clark, P., “Drax Seeks to Reinvent Itself For a Post-Coal Future,” Financial Times, Nov. 30, 2016, https://www.ft.com.

22. Survey respondents from Mexico tend to identify themselves with Latin America, not North America. So, “North America” in this context means the United States and Canada, not Mexico.

23. G. Unruh et al., “Investing for a Sustainable Future.”

24. See, for example, articles in a recent special report on emerging markets in MIT Sloan Management Review: M. Hensmans, “Competing Through Joint Innovation,” MIT Sloan Management Review 58, no. 2 (winter 2017): 26-33; A. Devang, C. Kruse, A. Parker, and P. Siren, “The Next Wave of Business Models in Asia,” MIT Sloan Management Review 58, no. 2 (winter 2017): 35-39; M. D. R. Chari, K. Luce, and I. Thukral, “Mastering the Market Intelligence Challenge,” MIT Sloan Management Review 58, no. 2 (winter 2017): 41-49; and S. Prashantham and G. S. Yip, “Engaging With Startups in Emerging Markets,” MIT Sloan Management Review 58, no. 2 (winter 2017): 51-56.

25. CB Bhattacharya and P. Polman, “Sustainability Lessons From the Front Lines,” MIT Sloan Management Review 58, no. 2 (winter 2017): 71-78.

26. Bhattacharya and Polman, “Sustainability Lessons From the Front Lines,” p. 73.

27. “Sustainable Living Brands Leading Unilever Growth,” May 20, 2016, www.unilever.com.

28. “Worn Wear: Better Than New,” n.d., http://www.patagonia.com/worn-wear.html

29. “Retail Growth by Not Growing,” Dec. 2, 2015, http://www.pymnts.com.

30. S. Griffin, H. Buxel, and Gökçe Esenduran, “Surprising Insights from Environmental Screenings,” MIT Sloan Management Review, Oct. 16, 2013, https://sloanreview.mit.edu.

31. BASF, “Examples for Accelerator Solutions,” n.d., https://www.basf.com.

32. SASB, “SASB Materiality Map™,” n.d., https://www.sasb.org

33. Jacobs Douwe Egbert acquired the Kraft coffee unit in 2015 from Mondelez, which was spun off from Kraft Foods in 2012.

34. Wal-Mart Stores, Inc., “2016 Global Responsibility Report,” n.d., http://corporate.walmart.com.

35. M. Egan, “Ecoimagination Ten Years Later: Proving That Efficiency and Economics Go Hand-In-Hand,” Oct. 29, 2015, http://www.gereports.com.

36. “The 2016 Sustainability Leaders,” 2016, www.globescan.com.

37. Interview with Blaisdell took place for our 2015 “Joining Forces: Collaboration and Leadership for Sustainability,” report, op. cit. (Ref. 4), when she was a manager at Timberland.

38. “Higg Index,” 2017, http://apparelcoalition.org.

39. W. Kornegay, E. Olson, and D. Kiron, “Bringing Sustainability Metrics to Purchasing Decisions,” Nov. 13, 2015, https://sloanreview.mit.edu.

40. BSR, “Collaborative Initiatives: Procurement Leadership Group,” n.d., https://www.bsr.org.

41. D. Kiron, N. Kruschwitz, K. Haanaes, M. Reeves, and E. Goh, “The Innovation Bottom Line,” Feb. 5, 2013, https://sloanreview.mit.edu.

42. UNEPFI, “Integrated Governance: A New Model of Governance for Sustainability.”

43. Paine, L.S. “Sustainability in the Boardroom: Lessons from Nike’s Playbook.” Harvard Business Review 92, no. 7-8 (Jul-Aug 2014): 87-94.

44. R.G. Eccles and T. Youmans, “The Board That Embraced Stakeholders Beyond Shareholders,” MIT Sloan Management Review, June 9, 2016, https://sloanreview.mit.edu.

45. Atlas Copco AB, “Atlas Copco Annual Report 2015,” http://www.atlascopcogroup.com.

46. These results were published in G. Unruh et al., “Investing for a Sustainable Future.”

47. M. Santisteve, “The IR Opportunity to Communicate Sustainability,” Nov. 25, 2014, www.irmagazine.com.

48. D. Kiron et al., “Sustainability’s Next Frontier.”

49. D. Kiron et al., “Joining Forces.”

50. Ibid.

51. Interview with Turner took place for D. Kiron et al., “Joining Forces,” when he was a manager at Stonyfield Farm.

52. Bhattacharya and Polman, “Sustainability Lessons.”

53. K. Earley, “More Than Half of All Businesses Ignore UN’s Sustainable Development Goals,” The Guardian, Sept. 30, 2016, www.theguardian.com.

54. I. Embree, “How 17 Companies Are Tackling Sustainable Development Goals (and Your Company Can, Too),” The Huffington Post, Sept. 13, 2016, www.huffingtonpost.com.

55. L. Elliott, “Carney Warns of Risks From Climate Change ‘Tragedy of the Horizon’,” The Guardian, Sept. 29, 2015, www.theguardian.com.

56. G. Unruh, “Ronald Reagan: The Father of CSR,” The CSR Blog, March 9, 2011, www.forbes.com.

i. G. Unruh et al., “Investing for a Sustainable Future.”

ii. Content in this sidebar is adapted from R. Post, “For BASF, Sustainability Is a Catalyst,” MIT Sloan Management Review, Oct. 15, 2014, https://sloanreview.mit.edu.

iii. For the design of this document, see D. Kiron, N. Kruschwitz, M. Reeves, and E. Goh, “The Benefits of Sustainability-Driven Innovation,” MIT Sloan Management Review 54, no. 2 (winter 2013): 69-73.

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Comment (1)
Catherine Gonzalez
More than ever we need to celebrate corporations that are actually doing something for the environment.    

So I wanted to add to the discussion the winners of our 2017 sustainability award: https://sealawards.com/sustainability-award-2017/.

Cheers!